The definitive guide to advance assurance for startups

Charles BrecqueCharles Brecque
Last updated on:
March 2, 2022
Published on:
March 2, 2022

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Entrepreneurs in the UK, can raise investment from SEIS or EIS investors if they meet certain qualifying requirements. HM Revenue and customs (HMRC) determines if an investment qualifies as an SEIS or EIS investment because it offers tax advantages to the investors. Entrepreneurs can therefore apply to HMRC for advance assurance before raising their investment to show potential investors that the proposed investment may qualify for SEIS or EIS purposes. Businesses can also apply to HMRC for other types of advance assurance including advance assurance for R&D tax relief and advance assurance for social investment tax relief. This article explains what advance assurance is for venture capital schemes and everything startups should be aware of before making advance assurance applications.

What are the 4 venture capital schemes?

The British government offer 4 venture capital schemes which are designed to help business grow by offering tax benefits to individual investors:

  • Enterprise Investment Scheme (EIS)
  • Seed Enterprise Investment Scheme (SEIS)
  • Social Investment Tax Relief (SITR)
  • Venture Capital Trust (VCT)

Before raising an investment from investors, businesses can check with HMRC that the investment proposal qualified for a scheme by applying for advance assurance.

What are the benefits of obtaining advance assurance from HMRC?

Whilst obtaining advance assurance from HMRC is not essential for obtaining a venture capital scheme for an investment, it is a strong signal to prospective investors that the proposed investment may qualify for the venture capital scheme you applied for.  This is important as investors will only be able to claim a tax relief if the post-investment venture capital scheme application is successful. After receiving the investment, a company's venture capital scheme application is also likely to be processed faster if they have received a positive advance assurance result from HMRC.

The requirements of an advance assurance application will depend on the venture capital scheme which is being applied for.

What are the general requirements of an advance assurance?

All venture capital scheme advance assurance applications require the following information about the company and its subsidiaries to be provided:

  • the amount of investment the company expects to raise
  • the business plan and financial forecasts
  • a copy of the latest company accounts if available
  • which companies will use the investments
  • details of all trading and activities to be carried out, and how much the company expects to spend on each activity
  • a list of the amounts, dates and venture capital schemes under which the company has previously received an investment
  • an up to date copy of the memorandum and articles of association and details of any changes the company expects to make as part of the investment
  • a copy of the register of members from the date the company applied for advance assurance
  • the latest draft of any documents the company uses to explain the proposal to potential investors (e.g. a pitch deck)
  • details of any other agreements between the company and the shareholders or VCT
  • a signed letter from one of the company's directors or trustees if they are allowing an agent to act on their behalf
  • a completed checklist for EIS, SEIS, VCT or SITR with the advance assurance application form if the company is applying for any of the venture capital schemes
  • any other documents to show the company meets the qualifying conditions for the scheme

Curious about automated data extraction from documents?

What are the requirements of an SEIS advance assurance application?

A qualifying company can receive a maximum of £150,000 through SEIS investments. Companies established in the UK which are carrying out a new qualifying trade, are not trading on a recognised stock exchange and have no arrangements to become a quoted company or a subsidiary at the time of the share issue, do not control another company unless that company is a qualifying subsidiary and have not been controlled by another company since the date of the company being incorporated can use SEIS if they do not have gross assets over £200,000 when the shares are issued, are not a member of a partnership and have less than 25 full-time equivalent employees in total when the shares are issues.

The government have provided a full list of non-qualifying trades which are not eligible for SEIS investments. A company also can't receive SEIS investments if they have already received EIS or VCT investment. This means that a company seeking EIS investments should aim to raise their SEIS investments first.

Companies that qualify for SEIS investments will need to explain how they meet the risk to capital condition and will need to submit an advance assurance application which will ask for:

  • The company's corporation tax reference and company registration number (CRN)
  • The company's date of incorporation
  • If the company's affairs have already been dealt with at the Venture Capital Reliefs Team (VCRT)
  • Contact details and role of the person making the application
  • The amount the company intends to raise and how the funds will be used
  • The number of full time equivalent employees at the date of the expected share issue
  • The value of the company’s gross assets immediately before the expected share issue
  • The documents referenced in the general requirements section above
  • Details of the potential investors (names, addresses, the investment amounts)
  • Details of the company's objectives to grow and develop its trade in the long term

The risk to capital condition means that the company must use the money for growth and development and the investment should be a risk to the investors capital.

Growth and development means growing things like revenue, the customer base and number of employees. The growth and development of the company should be permanent and not rely on the investor’s continued support. The investment should carry a risk that the investor will lose more capital than they are likely to gain as a net return.

What are the requirements of an EIS advance assurance application?

Under EIS, a company can raise up to £5 million each year, and a maximum of £12 million in its lifetime (including amounts received from other venture capital schemes). The company must meet similar requirements as for SEIS except the company is permitted to have gross assets worth less than £15 million before any shares are issued, and not more than £16 million immediately afterwards, and the company must have less than 250 full-time equivalent employees at the time the shares are issued.

A company can receive investment under EIS as long as it’s within 7 years of the company’s first commercial sale.

Companies that qualify for EIS investments will need to submit an advance assurance application which will ask for the same details as for the SEIS but EIS companies will also need to explain how the money raised will be used to promote the growth and development of the company as well as details of all previous investments. A company qualifying as a knowledge intensive company can raise more money than the usual scheme limits allow.

What are the requirements of a VCT advance assurance application?

A Venture Capital Trust (VCT) is a company that’s been approved by HMRC and invests in, or lends money to, unlisted companies. To be approved as a VCT a company must not be a close company and must satisfy the HMRC conditions of approval, which include:

  • the VCT’s ordinary share capital has been or will be admitted to trading on a regulated market in accordance with Directive 2004/39/EC of the European Parliament
  • its income in that accounting period was derived wholly or mainly from shares or securities
  • it did not retain more than 15% of its income derived in that accounting period from shares and securities
  • no holding in any company represented more than 15% by value of the VCT’s investments at any time during that accounting period

The full list of requirements is available on

A company applying for VCT advance assurance must submit the same advance assurance application form as for SEIS and EIS investments.

What are the requirements of a SITR advance assurance application?

SITR is a state aid designed to help community interest companies, community benefit societies and charities raise money to support their trading activity. A state aid is any advantage granted by public authorities through state resources on a selective basis to any organisations that could potentially distort competition and trade in the European Union (EU).

The maximum amount of investment a company can raise through SITR is £1.5 million. A company will receive investment under GBER state aid or de minimis state aid, depending on the date of the first commercial sale and the trading activity for which the company is raising money for.

The main eligibility criteria for a SITR investment are that the company cannot:

  • have more than £15 million in gross assets immediately before the investment is made
  • have 250 or more full time equivalent employees at the time of investment
  • be controlled by another company
  • have more than £16 million in gross assets immediately after the investment is made

And the company must raise money for a qualifying trade.

A company applying for SITR advance assurance must supply the following information:

  • the certificate of incorporation of the company or charity
  • the memorandum and articles of association of the company or the equivalent governing documents of the charity, such as a trust deed
  • a summary describing the investment and how it will be used
  • a copy of any loan agreement the company or charity is using
  • any other supporting documents

How long does an advance assurance application take?

Companies applying for SEIS, EIS or VCT advance assurance will need to submit an advance assurance application form along with supporting documents and a completed checklist. SITR applications require the supporting documents to be submitted by email or post.

The amount of time it takes HMRC to process an advance assurance application is usually a couple of weeks but will depend on the quality of the application, the amount of applications being made at the same time and whether the application was made by email or by post. Companies can submit their applications by email to or by post to:

Venture Capital Reliefs Team
HM Revenue and Customs

After reviewing the application, HMRC will send a statement confirming that the investment is likely to qualify for a venture capital scheme or if not, why they believe the application does not meet the conditions of the scheme.

Who can complete an advance assurance application form?

An advance assurance application form can be completed and submitted to HMRC by a Company Secretary, Company Director or an authorised agent by enclosing a signed copy of the company's authorisation.

This article has explained the venture capital schemes offered by HMRC in the UK and the advance assurance application process startups can follow to confirm their eligibility for the scheme they are applying for. The advance assurance statement from HMRC is often key in the investment decision making process of potential investors. Moreover, investors will want to ensure that the company's IP is properly protected through employment contracts. To ensure your company's due diligence is not delayed because of poor contract management and weak contracts, start using Legislate today.

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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.

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